Header Right

Archives for November 2017

At Richard A. Crow and Associates, we are a well-established Round Rock CPA firm that has helped many businesses simplify the incorporation and business formation process. You probably know of several businesses whose formal names end with the acronym LLC. And you probably also know that LLC stands for limited liability company. But there are some things you may not know about an LLC.

What is an LLC?

A Limited Liability Company or LLC is a legal entity that allows you to protect your personal assets from the company’s liabilities. If your business is structured this way the “members” or owners will have no personal responsibility for the financial obligations of the business. With an LLC the business itself does not report taxes on its profits but uses “pass-through” taxation where the income and deductions are reported on the personal income tax returns of the members.

10 things you may not know about an LLC

An LLC generally protects its owners from personal liability for business obligations in much the same way a corporation does, but an LLC is not a corporate entity.*

Like a corporation, an LLC can do business in multiple states, although an LLC must be organized in a specific state.

The owners of an LLC are called “members.” There is no limit on the number of members an LLC can have, and members don’t necessarily have to be individuals. Members’ management roles are typically spelled out in an operating agreement.

Upon formation of an LLC, the members contribute cash, property, or services to the LLC in exchange for LLC shares or units.

An LLC may borrow money in its own name and is responsible for repayment of the debt.

An LLC is usually treated as a partnership for federal income-tax purposes. (The remaining four points assume partnership treatment.)

Like partners, LLC members are not considered employees of the company. However, an LLC can have non-member employees.

LLC members are taxed directly on company income. The LLC itself doesn’t pay federal income taxes.

If an LLC has a loss, its members generally can deduct their share of the loss on their own tax returns.

For tax purposes, an LLC’s income and losses are divided among its members according to the terms of their agreement. Tax allocations must correspond to economic allocations of profit and loss. An LLC is but one structure you might consider using for a business venture. We can help you determine which type of arrangement will best meet your objectives.